Government Incentives And Economic Growth Based On Centralization-Decentralization Analysis

This paper first discusses the connotation of centralization - decentralization, and points out that the political centralization and economic decentralization coexistence is the management characteristic of China, secondly under the centralization - decentralization framework, we deeply discuss about the central government and local government's incentive problems. Because of the encompassing character, the central government's behavior stands for the interest of its political base - the masses, and hence the facing incentive is to promote economic growth and improve the economic operation system in order to satisfy people's physical and spiritual needs. The local government's agency is the central government, and furthermore, in our country "voting with their feet" mechanism is less suitable than political promotion to analysis the incentives to enhance economic growth from local government. However, it is GDP that lies behind the incentives of political promotion; hence both share the same consistency:economic growth.Secondly, I use 1982-2008 data combining with economic growth model to examine the government incentives for economic growth effect. The conclusion is that the government's incentives promote economic growth with fluctuating contribution rate over time. Finally, this paper also uses corruption perception index (CPI) from 1995 to 2010 to measure the extent of corruption in the government, and the result shows that our government corruption level overall performance shows a downward trend, but is still below the international average.Last in sum, we think that "centralization-decentralization" promote the economic growth, and the government encouragement is one of the important economic growth impetus behind. Meanwhile, because our country market economy development is not perfect, the government can also produce negative effect to economic growth.